Correlation Between Haleon Plc and Sonoma Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Haleon Plc and Sonoma Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Haleon Plc and Sonoma Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Haleon plc and Sonoma Pharmaceuticals, you can compare the effects of market volatilities on Haleon Plc and Sonoma Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Haleon Plc with a short position of Sonoma Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Haleon Plc and Sonoma Pharmaceuticals.

Diversification Opportunities for Haleon Plc and Sonoma Pharmaceuticals

0.61

Correlation Coefficient

Haleon Plc  Sonoma Pharmaceuticals

Poor diversification

The 3 months correlation between Haleon and Sonoma is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Haleon plc and Sonoma Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonoma Pharmaceuticals and Haleon Plc is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Haleon plc are associated (or correlated) with Sonoma Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonoma Pharmaceuticals has no effect on the direction of Haleon Plc i.e., Haleon Plc and Sonoma Pharmaceuticals go up and down completely randomly.

Pair Corralation between Haleon Plc and Sonoma Pharmaceuticals

Considering the 90-day investment horizon Haleon plc is expected to generate 0.19 times more return on investment than Sonoma Pharmaceuticals. However, Haleon plc is 5.28 times less risky than Sonoma Pharmaceuticals. It trades about -0.13 of its potential returns per unit of risk. Sonoma Pharmaceuticals is currently generating about -0.07 per unit of risk. If you would invest  1,052  in Haleon plc on September 20, 2024 and sell it today you would lose (82.00) from holding Haleon plc or give up 7.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Haleon plc  vs.  Sonoma Pharmaceuticals

Haleon plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haleon plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Sonoma Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonoma Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Haleon Plc and Sonoma Pharmaceuticals

The main advantage of trading using opposite Haleon Plc and Sonoma Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Haleon Plc position performs unexpectedly, Sonoma Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Sonoma Pharmaceuticals will offset losses from the drop in Sonoma Pharmaceuticals' long position.

The idea behind Haleon plc and Sonoma Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.